Transcript

00:00:01

>> The weakening British pound and the strengthening euro are on a collision course to hit an unprecedented one to one exchange rate. And while Britain's Central Bank and many Britians would see it as a certain defeat, their EU counterparts wouldn't be too thrilled either. Reuters' markets columnist Jamie McGeever explains why.

00:00:18

>> Well, the euro has had a fantastic year. It's the best performing major currency in 2017, which is good for keeping down inflation. But the European Central Bank's problem is that it wants inflation to go up a little higher than it is currently. And a strong currency keeps inflation down because it keeps the cost of imported goods down.

00:00:41

For the Bank of England, it has the opposite problem. Inflation since the Brexit vote last year has gone through the roof. It's way above the Bank of England's target. And further weakness in the pound would make the cost of imports more expensive and push inflation even higher.>> Outside of imports, for consumers, weaker currencies mean less overall spending power per paycheck, at home, and on vacations abroad.

00:01:05

And in Britain, that's already being seen. The flip side is that for export industries, a weak currency at home is actually a boon, making them more competitive overseas.>> On a weak currency, we tend to suggest that overseas investors are taking a dim view of your economic prospects and your currency.

00:01:27

Of course, a weak currency gives your exporters a competitive advantage. So it actually could end up contributing to stronger growth.>> The only comfort for Britain's counting the costs of Brexit is that the euro's sterling rise has been so quick, analysts agree a pause is just as likely for now.